After the fraud scam involving excessive surcharges was uncovered 15 years ago, Schenker’s owner, Deutsche Bahn, has now finally been able to close the corruption chapter. Cathay Pacific was the last of just under a dozen airlines sued, and, at the beginning of this year, it ended its legal dispute with the DB Group by mutual agreement. In a joint statement, the two companies negated information about financial specifics of the deal.
Short review: Back in 2008/09, the air freight industry was hit by major shock waves, after cartel practices came to light. Above all, the sudden scandal alarmed the defrauded parties because they had paid excessive security and kerosene surcharges to freight carriers over longer periods, that had been secretly and illegally agreed between airline managers in shady rooms. According to documents presented by DB Schenker, the Deutsche Bahn subsidiary was defrauded of 1,76 billion euros resulting from excessive surcharges demanded by airlines. After the full dimension of the fraud had become obvious, Schenker parent, Deutsche Bahn, claimed compensation payments from 11 airlines. Simultaneously, the EU Commission imposed fines of 776 million euros on the same carriers for illegal price fixing. These were: Air Canada, Air France-KLM, British Airways, Cathay Pacific, Cargolux, Japan Airlines, LAN Chile, Martinair, SAS, Singapore Airlines and Qantas.
Lufthansa Group submitted a leniency application
Originally, the fraudster cartel also included Lufthansa Cargo and its sister company, Swiss WorldCargo. Yet, the EU waived fines as the Group had initiated the entire proceedings after it was guaranteed key witness status. However, the Lufthansa Group had to pay fines in the upper double-digit million range as a result of civil lawsuits bundled by Deutsche Bahn on behalf of aggravated parties such as Hellmann, Kuehne+Nagel, and others.
The last Mohican
Cathay Pacific was the last remaining defendant in this case after all other proceedings had been settled. Both sides involved have agreed to keep the details of the accord confidential, particularly the financial specifics it includes.
Martin Seiler, DB Board Member for Human Resources and Legal Affairs commented: “Our competition litigation experts have battled to secure over 65 settlements and recovered nearly 700 million euros in damages in the last few years – this marks a victory for justice and fair competition. I am pleased that this long-running legal process regarding the air freight cartel has now been successfully concluded.”
In their action against the air freight cartel, the plaintiffs of Deutsche Bahn had proceeded very creatively, writes the daily newspaper, Handelsblatt. Their comrades-in-arms recruited airline lawyers under the code word “Barnsdale”. This is the name of a historical landscape in the UK that is closely associated with the legend of Robin Hood. The aim was to avoid possible retaliatory measures such as the delayed loading of Schenker shipments at airports or their late delivery to customers, thus harming the agent.
Tire cartel emerges on the horizon
Further work may already be waiting for Seiler and his anti-corruption squad. As a result of recent raids, a cartel of tire manufacturers is emerging. According to informed sources, its members are likely to be the world’s leading players in the industry. However, the DB rail group is still keeping a low profile on the subject. Apparently, Seiler and his team’s tough stance against corruption enables an inflow of cash to replenish the empty coffers of the railway company.
